Heat Pump Blogs

​Heat Pumps Today editor, Will Hawkins, questions whether the RHI is an exclusive club or not?​

A year ago on a 'renewables' road show, there were three distinct visitor types to the stand I was manning. Namely, people from social housing companies, gas installers looking at the business potential of 'getting into renewables'. and 'high net worth individuals'.

The social housing companies were meeting their carbon reduction policy commitments by installing insulation products, heat pumps, more efficient gas boilers, solar panels or a combination of all of them. The show was used to keep themselves up to date.

​The gas installers were looking to differentiate themselves by switching into renewables and wanted to know how to do it. The final group were, usually, carrying out new build projects or carrying out renovation of old buildings which included installing a heat pump of sorts and they wanted to speak with the manufacturers.

​Six months later, the domestic RHI was launched in the UK to encourage homeowners to make their homes more energy efficient. Six months after the launch there are patterns beginning to emerge in the uptake of the domestic renewable heat incentive which appear to show that the RHI is being taken up by affluent homeowners and not by those who are less able to afford it.

According to OFGEM figures, the largest take up of the domestic RHI has happened in the South East of England, the wealthiest region of the country. In fact, nearly 46% of households that have made use of the RHI are in the South East. Considering that the scheme was aimed at homes which are off the gas grid, the South East has the highest number of homes connected to mains gas, according to OFTEC (http://www.oftec.org.uk/). Where there are higher proportions of homes off the gas grid, including Wales and Scotland, respectively, only 5.2% and 16.5% of total homeowners have taken up the RHI.

​The Battle Upfront

​OFTEC also highlights the observation that it appears that only a small proportion of the British home owning population can afford the upfront costs of between £9,000 and £14,000 to install technologies eligible under the RHI, including heat pumps. RHI can only be claimed once energy efficiency equipment has been installed.

Jeremy Hawksley, Director General of OFTEC said,

​“It’s no surprise that the highest take up of the RHI has been in the most affluent parts of Britain. These homeowners can afford to change and, with interest rates remaining low, the RHI is little more than an alternative investment opportunity which adds even more value to their properties

“But what about the large percentage of off gas grid homes who simply can’t afford to get started with the RHI? The government is pushing all off grid homeowners towards the RHI in order to reduce their carbon emissions but, for most, the high upfront cost effectively excludes them. With almost 30% of rural households in England and 47% in Wales currently living in fuel poverty, this approach makes no sense at all.”

​OFTEC, which represents the interests of the oil-fired industry, would like the government to introduce a boiler scrappage scheme to help meet the carbon reduction targets. The organisation sees this as for more affordable for homeowners and could address the problem of fuel poverty.

RHI Progress

Steve Roberts, Head of Market Intelligence at Department of Energy and Climate Change, has been garnering feedback on the progress of the RHI to date through the Heat Pump Group discussion group on LinkedIn. Some comments include suggestions that the RHI is “the government's best kept secret”, highlighting the low levels of awareness among homeowners about the scheme. Others criticise the bureaucracy involved with the scheme as a barrier to wider uptake of the RHI. Some installers cite the high upfront costs for them before a job begins, including purchasing heat pumps. This can create cash flow problems for a small installer business.

Nevertheless, judging by the number of news items that come into the Heat Pumps Today offices each month highlighting heat pumps installations across the UK, there are companies in the country making a healthy living installing heat pump solutions in commercial and domestic properties.

But, currently, the early adopters are taking advantage of the RHI in the UK. And, as with all early adopters in a market, they are often less concerned with the expense and they are more interested in the technology despite the possible pitfalls. Instead of the RHI being an incentive solely for the rich, perhaps the scheme is in its natural stage before the early majority begin to become aware of the incentive and work out how to take advantage of it?

If there was a large enough number of high net worth individuals to do business with, that would make sense, but there's not. Reductions in the budgets available for PFI spending can be problematic but we do have to adhere to best practice in environmental sensitivity. Is PFI and the social sector not the way to go?